Daily Commentary – 22 October 2018

Contact Merchant West Capital Markets on: (+2711) 305-9500 or treasury@merchantwest.co.za

USD / ZAR 14.2979 - EUR / ZAR 16.4820 - GBP / ZAR 18.6931 -

Economic Events:

22 October: No data of real Importance

23 October: EC Consumer Confidence

24 October: EC Manufacturing PMI - SA CPI and MTBPS - US Mortgage Application and Manufacturing PMI

25 October: SA PPI - US Advanced Goods Trade Balance and Initial Jobless Claims

26 October: US GDP and University of Michigan Sentiment

Market Commentary:

The Rand opened on the front foot this morning, following some risk on sentiment toward emerging markets this morning.  Opening at about R14.37 and touching a low near the R14.26 level just before 09h30.

The week opens with big focus on the much anticipated Mid Term Budget Policy Statement  (MTBPS) by the newly minted Finance Minister and ex Reserve Bank Governor Tito Mboweni.  Tito is likely to follow with Nene’s conservative budget approach as National Treasury will have to practice restrain in the coming years to consolidate debt.  Mboweni did mention that the swollen public sector wage bill needs a deeper look suggesting that is likely is first key area of possible reform, this in turn affecting the currently malfunctioning  State Owned Enterprises (SOEs) which currently have rising overheads.  While Moody’s gave the nation some reprieve by holding the Baa3 rating with a stable outlook much discipline is still required from fiscal consolidation.

Prior to the MTBPS speech the SA CPI data is expected with consensus at 4.9%. this will be an indication of inflation push into the economy and a possible hint at to how the SARB will react to rates in the next announcement in November. MTBPS and SA CPI are scheduled for Wednesday 24 October.

Moody’s downgraded Italy on debt and deficit concerns from Baa2 to Baa3 with a stable outlook. This is seen as a softer announcement by the ratings agency than had been expected. The rating is a notch above junk status and seen a calming investor anxiety.

Our Range for the day: R14.1500 – R14.4500